Constellation Brands Inc Class A (STZ)

Interest coverage

		Feb 28, 2025	Feb 29, 2024	Feb 28, 2023	Feb 28, 2022	Feb 28, 2021
Earnings before interest and tax (EBIT)	US$ in thousands	-494,200	2,655,600	781,400	662,600	2,925,700
Interest expense	US$ in thousands	411,400	435,400	398,700	356,400	385,700
Interest coverage		-1.20	6.10	1.96	1.86	7.59

February 28, 2025 calculation

Interest coverage = EBIT ÷ Interest expense
= $-494,200K ÷ $411,400K
= -1.20

The interest coverage ratio measures a company's ability to meet its interest obligations with its operating income. Looking at Constellation Brands Inc Class A's interest coverage over the past five years, we observe a fluctuating trend.

As of February 28, 2021, the interest coverage ratio stood at 7.59, indicating that the company generated sufficient operating income to cover its interest expenses almost eight times. However, this ratio decreased significantly to 1.86 by February 28, 2022, implying a potential decrease in operating income relative to the interest burden.

In the following year, as of February 28, 2023, the interest coverage ratio slightly improved to 1.96, indicating a modest recovery in the company's ability to cover its interest costs. By February 29, 2024, the ratio surged to 6.10, signifying a marked improvement and a return to a healthier financial position.

However, by February 28, 2025, the interest coverage ratio turned negative at -1.20, indicating that the company's operating income was insufficient to cover its interest expenses. This negative ratio raises concerns about the firm's financial health and ability to manage its debt obligations.

In conclusion, Constellation Brands Inc Class A's interest coverage ratio has exhibited significant fluctuations over the past five years, showing both strengths and weaknesses in its ability to cover interest expenses with operating income. Monitoring this ratio is crucial for assessing the company's financial stability and debt repayment capabilities.